THE CONGRESS: Men of Arms

Before its adjournment last June, the 73rd Congress decided to have a look at the U. S. armament business. Its members had been reading books, looking at magazines and listening to lectures, and on the theory that gunsmiths and powder-makers instigate wars to sell their goods, the Senate created a special investigating committee and put slim, sleek-haired Senator Nye of North Dakota in charge.

All summer long Senator Nye and his committee raked and scraped material together. Nothing was too old, nothing too far-fetched to be of possible service. Fortnight ago public hearings began. Last March FORTUNE pointed out that, though the U. S. was far from innocent in the game of international armaments, U. S. munitions makers were very small fry indeed compared to such vast purveyors of war materials as France’s Comité des Forges and Schneider-Creusot, Germany’s Krupp, Britain’s Vickers-Armstrong, Czechoslovakia’s Skoda. First companies called before Senator Nye’s committee were Electric Boat Co. of Groton, Conn, (submarines) and Driggs Ordnance & Engineering Co. (antiaircraft guns). Those who expected to hear the cannons roar had to content themselves with a volley of cap pistols. The business ethics of these companies might be low but their volume of trade and general influence in world affairs was even lower. What made their testimony important was that they are primarily dependent on war or the fear of war to make not big profits but any profit at all.

Last week, however, what most U. S. citizens consider the greatest munitions firm in the country was called to the carpet. Accompanied by a buzzing swarm of lawyers, secretaries and assistants, the three brothers du Pont, Pierre. Lammot, Irènée. with their cousin Felix, all of E. I. du Pont de Nemours & Co., stepped into the white marble caucus room of the Senate Office Building to give their testimony. A square-jawed fact: the du Pont company had made a profit of $250,000,000 during the War, paid 195% in dividends, and salted its winnings away in virtual control of General Motors.

The du Ponts were very suave, very self-possessed but not very well dressed. Brothers Lammot (president) and Irènée (vice chairman of the board) were in black, puffing pipes. Brother Pierre (chairman of the board) was dressed in brown. Cousin Felix (vice president) was handsome in pale grey with socks and tie to match. Like burlesque impresarios, munitions makers do not desire publicity. The du Fonts prepared for their ordeal by issuing a 42-page booklet (and a 13-page tract explaining the booklet) stating their company’s position in the matter of munitions.

The company with its infinite side lines (Fabrikoid, Duco, Cellophane, Rayon, etc., etc.) has made much more money since the War than when it was providing smokeless powder to all the Allies. Military and sporting explosives now rank tenth among the company’s money-making enterprises.

But what Senator Nye and his committee were trying to prove was that, though the du Ponts disparage the munitions side of their businesses, they are not at all anxious to let it lapse, frequently encourage the same kind of unscrupulous sales tactics used by their smaller U. S. and greater European confréres.

First important evidence was that du Pont lobbyists in Washington had worked hard and fast to block action on the House resolution providing U. S. cooperation in a general arms embargo on warring nations. And the du Fonts, it quickly developed, had a fine working agreement with the great British Imperial Chemical Industries Ltd. to divide territories and profits for the sale of military explosives and other chemicals. How effectively this agreement worked was shown by a letter from the du Pont agent in South America, one N. E. Bates Jr., to I. C. I. in which he pointed out that the Roosevelt embargo made it impossible for du Pont to fill an order for 440 Ib. of picric acid. 4,409 Ib. of TNT, 66 Ib. of nitroglycerine for the Chaco war, but since Britain had signed no embargo I. C. I. was quite welcome to the order instead. Mr. Bates was most apologetic about the smallness of the order.

Slightly embarrassed. Irènée du Pont said that he “guessed Mr. Bates had made a bust,” and then went on to talk about the part his company played in the War:

“If we hadn’t shipped powder to France she would have been defeated and Germany would have conquered England as well. The Kaiser with his world dream of power wouldn’t have stopped there.”

Interrupted Senator Bone of Washington:

“Evidently you think the du Fonts kept the United States from being a German province.”

“I think we had much to do with it,” replied Irènée du Pont.

Early in the investigation, a Driggs armament salesman brought the name of George V into the limelight by insisting that His Britannic Majesty had intervened personally in an attempt to swing a sale of anti-aircraft guns to Poland from Driggs to Vickers. Even before Britain had recovered from its shocked horror at this statement other big names came tumbling out into the open. In a few days other arms salesmen had dragged in: Edward of Wales (obstructing Curtiss-Wright sales to South America); Herbert Hoover (as an antidote for H. R. H.); President Rodriguez of Mexico; Admiral Ismael Galindez of Argentina; Juan Leguia, son of the late president of Peru; Brig.General Juan F. Azcarate Pino, military attaché of the Mexican Embassy at Washington; an unnamed Turkish Minister of Marine; Comptroller General Lopez of Bolivia; an unnamed chef de cabinet of Brazil; an assorted handful of Chinese war lords. The inferences of the correspondence was that almost all of these foreign statesmen had accepted bribes as a quid pro quo in U. S. armament sales abroad. As unofficial protests piled up at the State Department, Secretary Hull attempted to pass them off with a single shrewd remark:

“I suppose mendacity reaches its highest point in connection with investigations of the manufacture and sale of munitions.”

But that was not enough to soothe foreign pride. When over the categorical denial of President John S. Allard of Curtiss-Wright Export Corp.. it was proved that the latter’s firm had paid “palm oil” to Comptroller General Lopez of Bolivia, protests continued pouring in. Within a few days Secretary Hull had no less than 15 on his hands. Secretary of Commerce Daniel C. Roper announced that it had been reported to him that Latin Americans, sensitive about bribe-taking, would cancel all U. S. trade contracts unless the Senate investigation was conducted more privately. Chilean Minister of War Emilio Bello Codesido announced that no U. S. bids would be considered in the next purchase of aviation material. Senator Nye, after a conference with Secretaries Hull and Roper, tried to put a better face on his inquiry by explaining: “The committee deeply regrets that a false impression may have been created, and that . . ” the opinions of these agents seem to have been construed as necessarily reflecting the opinion of the committee.”

Three days later, therefore, when the four du Fonts and their seven lawyers were again assembled, proceedings were carried on under partial censorship. Pierre du Pont testified that it was the company’s policy to refuse business rather than pay bribes to government officials. A bundle of documents was promptly introduced showing that the du Pont company had paid large “commissions” to Chinese Nationalist officials in 1932, whose names, in accordance with the new procedure, were not released.

“Well,” said Brother Lammot du Pont, “that was an extremely unusual procedure and not in accord with the company’s policy.”

As the investigation proceeded, it became increasingly difficult to believe the du Pont thesis that military explosives, small though it appeared, is a business in which the firm takes no interest, would gladly be without. Evidence was introduced to show that in February 1933 the company signed a contract with one Del Sungo Giera, active throughout the War as a spy both for the Germans and the Allies, secretly to provide munitions for Germany. Suddenly reminded of the Versailles Treaty the company tore up this contract and substituted another saying that they would ship no munitions to Germany without the approval of the U. S. Government. This contract was later bought back by the du Fonts for $25,000. Discussion of this point produced other evidence from the du Pont files showing that other U. S. firms were shipping quantities of revolvers and Thompson submachine guns to Communists and Nazi storm troopers.

In speaking of these and other documents, du Pont officials kept referring to what they called the “Poison Label,” a special mark placed on secret documents in the company files that were to be read only by Senate committee investigators or du Pont directors. The “Poison Label” turned out to be a square rubber stamp that read:

Upon instructions of the War and/or Navy Department, this document is entrusted to Mr. Donald V. Wemple for use by United States Government only.

A Major K. K. V. Casey of the du Pont company kept the stamp on his desk and had sole responsibility as to which of the du Fonts’ vast bales of incriminating documents deserved the “Poison Label” and which did not. Donald Y. Wemple is a minor employe of the Nye Committee.

The du Pont lawyers, headed by their chief, Col. William J. (“Wild Bill”) Donovan, had been hard at work. Investigators were ready to disclose for the record the du Fonts’ contributions to recent political campaigns. Hastily the committee decided to postpone further questioning of the du Fonts until after November elections.